Lead or Go to Jail:Opinion - TheStreet

In 2009, the U. S. government set a new standard for how corporate leaders must now do business in the global marketplace.

On Nov. 10, an American entrepreneur named Frederic Bourke was sentenced for violating the Foreign Corrupt Practices Act (FCPA) by conspiring to bribe foreign officials in an Azerbaijan oil deal. He was given one year and a day in prison, three years supervised release, and fined $1 million. If nothing else, the sentencing confirms that CEOs can indeed go to jail under the new FCPA enforcement regimen, and that the DOJ is perfectly willing to target top executives as a warning to others.

But the government's message goes further, much further. One juror had told Bloomberg, "We thought he...definitely

could have known...It's his job to know emphasis ours."

Prosecutors never even suggested that Bourke formally approved any bribes but only, as the juror noted, there was the possibility he did.

Sentencing Judge Shira Scheindlin commented that it was "still not entirely clear to me whether Mr. Bourke is a victim, or a crook, or a little bit of both," but that prison time was necessary in any event to deter FCPA violators. The critical point is that his individual actions are not at issue because, in his role as CEO, he had a responsibility to know what was going on across the company and to have programs in place to prevent it.

It's a tectonic shift in the leadership landscape. No longer is it simply commendable for CEOs to set the right tone at the top or to take decisive steps to put anti-corruption training and interdiction programs in place. Now it is compulsory as their very personal freedom is at stake.

The captains of multinational behemoths likely face even heavier burdens. Big as they are, there are proportionately greater numbers of potential bad actors in their ranks. But the leadership burden is additionally staggering because it doesn't just pertain to the company itself and its own employees. The scope of current anti-corruption laws also makes companies and their leaders responsible for contractors, joint ventures, and other significant relationships that, for the top 100 companies in the Fortune 500, can number many thousands.

Not just everyone working in and for the company, but everyone working with the company must know where the corporation and its leaders stand, unequivocally, on this issue - and they must behave accordingly. The FCPA thus demands that executives be leaders in their industries - in fact, leaders in their world - and not just in their own companies.

Such leadership goals might seem...well, unachievable. The good news is that corporate leaders can get scored high for effort. As Lucinda Low, a partner at Steptoe & Johnson LLP and one of the nation's leading authorities on international anti-corruption laws, told us, "The fact that you have an effective compliance program mitigates penalties substantially. You can translate that into dollar-for-dollar benefits."

Corporate leaders who conspicuously set the right tone and compel the right prophylaxis can become de facto partners with the regulators and enforcers. Yes, they have raised the bar to hitherto unimaginable heights in terms of compliance and liability. But they also want you to succeed.

At a recent conference on the FCPA, government officials advised that they are now looking at entire industries for potential violations. It is a marked departure from the company-by-company approach of past years. They even identified some of the industries in their sights: pharmaceuticals, medical devices, aerospace and defense, and extraction-based industries such as oil and minerals.

More than just valuable intelligence for companies that happen to be in those industries, the comments by the officials underscore a fundamental point: The government makes no effort to hide its strategy. Quite to the contrary, they want to tip their hands. They want to give fair warning and time enough for companies to clean their Augean stables.

The more your leadership supports their objectives, the more you stand to gain during that final leadership test when, perchance, your best-made plans fall short. Consider the example of agricultural giant

Monsanto

(MON)

, which, in 2005, agreed to a $1.5 million fine after one of its managers and an independent promotional company in Indonesia bribed a Jakarta official to facilitate sales of genetically modified cotton. It was a significant embarrassment, but Monsanto had launched its own internal investigation and voluntarily notified government officials of its findings.

That $1.5 million stands in sharp contrast to the $800 million levied against German engineering giant

Siemens

(SI)

three years later for multinational FCPA violations across the company. Subsequently, Siemens vowed sweeping reforms, which was an excellent step, but Monsanto's self-surveillance spoke more eloquently to the company's commitment.

For corporate leaders, the FCPA is the extreme test - comprehensive, global, reaching beyond the company itself, sometimes veritably Kafkaesque in its demands - of how business leaders must anticipate the unknown and act on their own initiative at every possible turn. As SEC Chairman Mary Schapiro said earlier this year in a different but relevant context, "Regulation is a two-way street. The 'regulated' need not wait for a regulator's reforms, though they will come."

It's not the first time I've quoted that bit of wisdom from Chairman Schapiro, and I doubt it will be the last.

Richard S. Levick, Esq., is the president and chief executive officer of Levick Strategic Communications, a crisis communications firm. He is the co-author of Stop the Presses: The Crisis & Litigation PR Desk Reference and writes for www.bulletproofblog.com.He was named to the 2009 NACD Directorship list of "The Most Influential People in the Boardroom." Reach him at rlevick@levick.com